LIC HOUSING SCAM:Housing scam: CBI arrests top officials of PSU banks,

financial institutions
MUMBAI: The Central Bureau of Investigation (CBI) has arrested eight finance executives, including the
chief of LIC Housing Finance, accusing them of taking bribes to give big corporate loans and sending
shockwaves through stock and property markets at a time when the government is buffeted by a series of
high-profile scandals.
LIC Housing Finance chief executive Ramachandran Nair, Life Insurance Corporation secretary for
investments Naresh K Chopta, Bank of India general manager RN Tayal, and Central Bank of India
director Maninder Singh Johar were among those arrested in the nationwide swoop by investigators.
The agency also arrested Rajesh Sharma, chief executive of Money Matters Group, a specialist loan
arranger that was the go-between for lenders and corporates and is at the centre of the scandal.
CBI said Money Matters 'either bribed or attempted to bribe' bankers to get loans for many companies,
including wind energy developer Suzlon, hill station township builder Lavasa, and Mumbai developer DB
Realty. The bankers were accused of seeking bribes of as much as Rs 50 lakh on transactions. CBI did
not share details.
News of the arrests, which broke during the closing hours of trade, hit stocks of some of the companies
involved. Shares in Money Matters led the tumble, losing 20%, while LIC Housing Finance and DB Realty
lost 19% and 17%, respectively. Central Bank of India lost 8.1% and Bank of India fell 5.3%.
"Officers of top management and middle management of various public sector banks and financial
institutions were receiving illegal gratifications from the private financial services company who were
acting as mediators and facilitators for corporate loans and other facilities from financial institutions," a
CBI statement said. The arrests come at a time the government is on the defensive and is accused of
condoning a culture of loot.
These are the biggest and most high-profile arrests since the Unit Trust of India corruption scandal a
decade ago and the 1992 securities scam.
Some saw the arrests and the publicity around them as diversionary tactics by the government. "While
the corruption in these financial institutions needs to be thoroughly probed, the timing of this action is
suspect. CBI is directly controlled by the government. At a time when the government is feeling the heat in
Parliament over the 2G scam, asking CBI to conduct raids across the country makes one suspect the
motive behind this," said Arvind Kejriwal, founder of NGO Parivartan and a Magsasay award winning
activist.
All the accused will be in CBI custody until Monday. They have been charged under the Prevention of
Corruption Act and, if convicted, could be jailed for up to seven years and lose retirement privileges.
Experts said the arrests could choke liquidity in the market, as banks apply the brakes on fresh lending,
especially to property firms that have been classified as 'sensitive' by the Reserve Bank of India, which
fears a speculative bubble building in the real estate sector.
"Liquidity will get tight as banks get more cautious towards financing real estate projects," said Vikas
Oberoi, managing director of Oberoi Realty , a Mumbai-based property developer.
Shankar Sharma, vice-chairman and joint managing director at First Global, said the crisis for the markets
may blow over. "It will have some sentiment value may be for half a day tomorrow (Thursday), but I think

the markets are smarter and would discern the good guys and the bad guys."
The domino effect of the arrests could force other lenders in the system, notably mutual funds and high
net worth individuals, to also curb lending to real estate firms.
"Liquidity in real estate papers has always been low and most investors hold them to maturity. Also, the
repaying capabilities of companies have been under question. So, to that extent, there are concerns with
such a scam breaking out," said Nandkumar Surti, chief investment officer, JPMorgan Asset Management
India.

Sensex ends 232 pts lower on housing finance scam

Equity benchmarks witnessed a sharp fall on Wednesday in the last half-hour of trade with news that the
Central Bureau of Investigation (CBI) has conducted raids in the premises of LIC Housing Finance in
Mumbai, Delhi, Kolkata and Chennai.
The 30-share BSE Sensex shed more than 300 points in late trade but managed to show some recovery
to close at 19,459.85, down 231.99 points.
CNBC-TV18 reported that the housing loan scam not only involved name of a few developers but some
Central Bank of India officials as well. Several arrests, related to the scam, too have been made.
This triggered huge sell-off in the banking as well as in the realty companies' shares. Respective indices
crashed 3% each. Shares of LIC Housing Finance, Central Bank of India and Bank of India tanked 18.3%,
8% and 5.9%, respectively, on the back of this news. The selling was also seen in capital goods, metal
and power companies' shares.
However, clearing their stance, Mumbai-based real estate companies including Indiabulls Real Estate,
HDIL, Orbit Corp and DB Realty, told CNBC-TV18 that they did not have any exposure to LIC Housing
Finance and that no raid had been conducted at their office premises.
The 50-share NSE Nifty plunged 69 points or 1.16% to settle at 5,865.75. Even the broader indices like
BSE Midcap and Smallcap indices slipped 0.56-1.11%.
India's largest lenders SBI and ICICI Bank tumbled 3.5% & 2.75%, respectively. HDFC Bank, PNB and
Axis Bank declined 2.6-3%; IDFC was down 1.8% and Kotak Mahindra Bank fell 0.7%.

Realty companies like Ackruti City, HDIL, Indiabulls Real Estate, Orbit Corp and Parsvnath Developers
slipped 2-7%. DB Realty plunged 16.23% and DLF was down 3%.
BHEL from capital goods space lost 2.6% and L&T was down 1.6%. In technology pack, TCS tanked
2.5%; Wipro was down 1.8% and HCL Tech down 1.4%. Infosys declined 0.5%.
NTPC, Reliance Power, Power Grid Corp, Tata Power and Suzlon Energy from power pack were down
0.7-1.7%. ACC and Ambuja Cements went down 1-2%.
Heavyweight ONGC slipped 2%; BPCL was down 0.7% and Cairn India down 0.9%. In metal segment,
Hindalco, Sterlite Industries and Jindal Steel lost 1-1.5%. SAIL plunged 2.6% and Sesa Goa was down
0.6% while Tata Steel gained 0.7%.
There was a mixed trend in auto space; Hero Honda, Bajaj Auto and Maruti Suzuki fell 1.3-1.8% while
Tata Motors went up 0.44% and M&M surged 3%.
Reliance Communications from telecom pack slipped 1.7% while Bharti Airtel rose 0.7% as Goldman
Sachs added the stock to conviction list and raised target price to Rs 430/share.
In midcap space, TVS Motor, Gujarat Flourochem, Apollo Tyres, SpiceJet and Akzo Nobel gained 3.4-8%
while Money Matters crashed 20% on talks of CBI raid on its premises.
Man Infra was down 15.38%. MVL and Shree Ashtavinayak fell 8-9%.
In smallcap space, Goenka Diamond, MSK Projects, Splash Media, Murli and Karuturi Global were up 1019.5% while Solvay Pharma, SEL Manufacturing, eClerx Services, Technofab Engg and Rollatainers lost
7-11.5%.
Turnover was very high ahead of F&O expiry tomorrow. Total traded turnover on exchanges stood at Rs
2,35,369.99 crore. This included Rs 15,797.22 crore from NSE cash segment, Rs 2,15,180.46 crore from
NSE
F&O
and
the
rest
of
Rs
4,392.31
crore
from
BSE
cash
segment.
About 1397 shares advanced while 1794 shares declined on the Bombay Stock Exchange. Nearly 262
shares were unchanged.

CBI has arrested at least eight officials on charges of taking bribes to grant
large corporate loans.
In a series of scams that have been plaguing the country, the latest one to be unearthed today is a
housing scam in which several public sector banks and a leading financial services firm have
been implicated.
The Central Bureau of Investigation, India's premier investigating body, has arrested at least
eight officials from banks and financial institutions on charges of taking bribes to grant
large corporate loans.
This included the CEO of LIC Housing Finance Corporation Ramachandran Nair and also
Rajesh Sharma, the CEO of Money Matters Financial Services, a financial services firm, on the
charges that they intermediated these loan. The others arrested include Central Bank of India

director Maninder Singh Johar, Punjab National Bank deputy general manager Venkoaba Gujjal,
Bank of India general manager RN Tayal, LIC Secy (Investment) Naresh Chopra.
The investigative agency also raided offices of the company in New Delhi, Mumbai, Kolkata,
Delhi and Jalandhar.
Five separate cases have been registered and investigations are on, CBI said in a press
conference, according to reports. It hasn't put up a figure to the size of the scam.

LIC Housing scam draws attention to artificial real

estate valuations and govt bank support to the sector
Real estate valuations are opaque and the government had openly supported the sector after the financial
crisis. The current real estate scam is the outcome of these two factors, say experts
The arrest of eight officials from public sector banks and financial companies for allegedly taking bribes to sanction
loans to realty firms, has drawn attention to one of the key factors that has led to this real estate scam: Opaque
valuation methods that allow artificially high valuation of properties, making it possible to go for such improper loans.
"It's not just a matter of involvement of public sector banks or mediators; the system of real estate valuations is the
crux of the scam," said Pankaj Kapoor, CEO & founder of Liases Foras, a real estate rating and research firm. "I think
the Central Bureau of Investigation (CBI) got involved in the matter because there could be risky securities on which
loans have been given. For instance, a property which should have a value of Rs150 crore is being projected as
worth Rs500 crore. That becomes the security on which a bank gives loans and is where the risk comes in," Mr
Kapoor told Moneylife. The real estate sector is the least transparent of the large business sectors. Developers are
always keen to get huge finances on artificial valuations on their properties as the industry is unregulated.
Officers in the top management and middle management of Bank of India (BoI), Central Bank of India (CBoI), Punjab
National Bank (PNB), Life Insurance Corporation of India (LIC) and LIC Housing Finance were receiving illegal
gratification through a private financial services company, acting as mediator and facilitator for corporate loans and
other facilities from these institutions, the CBI said in a statement.
"As of now, the name of only one arranger (of the loans) has come out, but I think there would be small and big
arrangers in the industry," Mr Kapoor said.
Being an unorganised and unregulated industry, not just big but small developers too in major cities try to value
property rates to their advantage. It is left to diligent banking officials to give loans against valuations that are

realisitic. "There were pressures on the PSU banks to give more and more loans to developers," explained Mr
Kapoor.
As a fall-out of the LIC Housing scam "there will be repercussions in terms of increased caution by banks in lending
to developers. Borrowing will become more expensive and the process involved in getting loans will get lengthier as
banks increase their vigilance levels. This means that we may see a marginal increase in the dependence on private
equity," said Anuj Puri, chairman and country head, Jones Lang LaSalle India.
Experts have been expecting a sharp fall in property rates since last year, when other industries were crippled in the
recession; but property rates did not come down significantly as developers continued to get funds from financial
institutions.
"In the period of the recession, when real estate prices had to come down significantly, why did the government ask
PSU banks to give loans to the real estate sector? Now we are suffering the effects of that decision. This year we
have crossed another peak in real estate rates because the government allowed further infusion of funds in the real
estate industry," Mr Kapoor said.

Loan scam: CBI arrests top govt officials

NDTV Correspondent, November 24, 2010

The CBI on Wednesday arrested CEO of LIC Housing Finance Ramachandran Nair and seven
others including three top officials of public sector banks whose executives gave loans to private
builders in exchange for bribes.
Apart from Nair, those arrested are Naresh K Chopra, Secretary (Investment), LIC, R N Tayal,
General Manager of Bank of India (Delhi), Maninder Singh Johar, Director (Chartered
Accountant) of Central Bank of India, Venkoba Gujjal and Deputy General Manager of Punjab
National Bank (Delhi). (Read: The CBI statement)
Rajesh Sharma, Chairman and Managing Director of Mumbai-based firm Money Matters Ltd
and two of its employees Suresh Gattani and Sanjay Sharma were among those arrested, CBI
said. (Also read: Loan scam: Banking, realty stocks tank)

The officials allegedly colluded with the firm to sanction large scale corporate loans, overriding
mandatory conditions for such approvals along with other irregularities. (Also read: Late selloff
hits stocks, Sensex falls 231 points)
"Officers of top management and middle management of various public sector banks and
financial institutions viz. Bank of India, Central Bank of India, Punjab National Bank, LIC and
LIC Housing Finance Ltd were receiving illegal gratifications from the private financial services
company who were acting as mediators and facilitators for corporate loans and other facilities
from financial institutions," CBI spokesman R K Gaur said in a statement.
A private financial services company, its CMD and other associates were allegedly bribing
senior officials of public sector banks and financial institutions for facilitating large scale
corporate loans. They were also gathering confidential business information from financial
institutions, said the CBI.
"These are clear cases of bribery and corruption by people working in the public sector. Land
prices in urban areas have sky-rocketed and developers need large sum to buy them. So bribing
officials for quick and huge loans is an easy option," said HDFC chairman Deepak Parekh.
The CBI has registered five separate cases in this regard and investigation is in progress, the
spokesman said.
Shares of LIC Housing dropped by Rs. 239, or 18.32 per cent, on Wednesday to close at Rs.
1,068.55.

Insurance and Ethics

Insurance contracts are often seen as a form of gambling. That is because they appear as a type of
wager that takes place over the lifetime of the policy. Basically the insurance company is willing
to bet that you and your property will not suffer the loss insured against. In exchange for making
this bet, and taking on the risk, they receive your premium. If they win the bet, they keep the
premium; if they lose, they make the payout. In this sense, they are often compared to a type of
long term financial casino.
The difference between your premium amount, and the amount the insurance company will have
to pay out if the loss occurs, is simply the odds the insurance company is getting for taking on
the bet. It's just like going to the horse races and betting on a horse that pays out 10 to 1.

This view of insurance has led to a number of people and religious communities disapproving of
insurance because of its similarities to gambling. Among those groups that avoid insurance are
the Amish and Muslim communities. What these people do instead is create a system of what is
known as social insurance. What this means is that if there is a disaster and someone suffers a
heavy loss, then the whole community will step forward and help them to deal with their loss and
rebuild. While this system is very simple, it has the potential to be just as effective a safety net as
insurance. However, it requires that the community actually does step forward and help those
who suffer from disasters. This means that it is more successful in small closed and closely knit
communities than in large modern societies.
Social insurance systems therefore are not always effective. Often the community that is
supposed to adopt it is not suitable. Also, in very large disasters the system can break down as a
small community will not be able to rebuild itself completely without outside assistance. This is
why larger modern insurance systems can be more robust. However, in extremely large disasters,
modern insurance systems can also run into difficulties. This is witnessed by the fact that it is
impossible to insure against certain risks such as floods and earthquakes. This is because the
damage would be simply on too large a scale for the insurance companies to cope with.
There are other ways in which insurance doesn't follow the gambling model. For instance
insurance companies seek to reduce the risk of the loss occurring constantly, for instance by
requiring the installation of fire alarms, or by reducing the loss if the insured against event does
occur, for example by providing rehabilitation to accident victims. Therefore insurance is like a
gamble in the reward and risk elements, but other elements are different.

Business Ethics - The Value Of Ethical Behaviour

Business ethics is about doing business in a manner that is morally right,
fair, and just. Every profession has its set of ethics or principles guiding
the conduct of business in that profession. Acting in a manner contrary to
the laid down ethics attracts penalty from the governing body or council
of the professional body concerned.
In simple terms . . . ethics is about what is right or wrong. In relation to
business, ethics is about what is acceptable business practice and what is
not.

Why worry about ethics?

Well, the world of business is focusing more on ethical behaviour. That is why subjects such
as ethical sourcing is beginning to take centre stage.
Therefore, to do business in the long-term, you should begin to take a closer look at how
you do business, how you treat your workers, what you pay your workers, and how safe
your work environment really is.

All of the above falls under ethical sourcing.

Ethical sourcing is about buying from suppliers who do business ethically . . . suppliers who
value their people and their environment enough to commit resources to sustainable
development.
If you ask me . . . business ethics is common sense. It's about doing what is right now and
always. It is about been fair.
One of the first things that come to mind when we discuss ethics is . . . honesty.
Ethics requires that business people be open and straightforward when dealing with
suppliers, employees, and other stakeholders of the business. Honesty should not just be
the best policy, it should be the only policy your business operates.
This includes . . .
paying employees what they deserve to earn
paying suppliers on time and all the time as agreed
keeping straight accounting records - don't keep two sets of books; one for tax
authorities and another for management
administering fair pricing for your products . . . don't 'roast' your customers with criminal
margins
On the part of employees, DO NOT steal from your employer. It is against good business
practice. It is wrong. It will cost you your job.
Let's take an example of how unethical behaviour can cost you your job and your
reputation.
One company had a large fleet of vehicles insured with a particular insurance company. In
addition to the company owned vehicles, all employees had at least one car insured with the
same insurance firm. The company paid a percentage of the insurance premium for staff, so
staff had to stay with the insurance firm.

Unknown to the company, the head of team of the insurance department, Ferdinand
Maverick*, was collecting a percentage of the premium from the insurance company as
commission for retaining the services of the insurance company as opposed to changing
insurance providers. And for over a decade he collected and enjoyed this money without
scruples.
Things took a turn when his contact person in the insurance company left the business and
a lady took over managing the account. The new person, Mrs Bola Wiegand, in the
insurance company was unwilling to pay Maverick the commission he was use to collecting
from the previous contact person.
Maverick got annoyed and threatened to withdraw the deal from the insurance firm for
another firm. This was a big account and it was disastrous to lose it.
Consequently, Mrs Wiegand wrote a petition to the client company explaining the situation.
A panel was set up by the client company to investigate the allegation. Maverick claimed it
was his right to collect the brokerage commission.
The company didn't think it was ethical to do so. Therefore, he got summary dismissal.
What do you think? What does business ethics dictate in a situation like this? If you were in
Maverick's shoes, what would you have done?
Make no mistake about it.
It is wrong, it is unethical, to accept favours . . . financial or otherwise . . . to do your job the job you are already being paid to do by your company. Accepting those favours in the
name of it being a gift doesn't make it right either.
Be ethically sound. Make business ethics your watch word. Manage conflict of interest
situations with soundness of mind. It will save you a lot of embarrassment and a lot of
troubles.

Ethics In The Insurance Industry

The present paper debates the main aspects related to ethics, into an industry that
recorded exponential growth in Romania insurance field. A very important role for a
good business is enhanced by the ethics. The specialists appreciate that ethics
represent a key factor for business success. Obviously, the insurance field into a
competition market must follow all the aspects related to ethics. The ethics should
be an essential element of every insurance company management. If we talk about
ethics in insurance we must mention all the generated relations between the
insurance company and persons/companies/ organizations that it comes into
contact. We also will analyze how the distribution channels follow the ethics
principles. The principles that should guide the activity of an insurance agent in the
moment he presents an insurance policy are honesty, respect towards other

persons or property. Even if these principles seem to be just a theory, the usage of
them in the daily activity represents premise of business success. The insurance
companies that will use practically the ethics principles will have important benefits
in the future, regarding their cota shre in the insurance field, but also towards theirs
perception for society.